Social-service providers tell city hall higher wage law may lead to cuts

Jesse Inman is exactly the kind of low-wage worker that the new $15-an-hour minimum-wage law is supposed to help.

Inman, 29, a native Seattleite and graduate of Western Washington University, makes $12.30 an hour as a shelter counselor at Downtown Emergency Services Center (DESC), one of the biggest human-services agencies in Seattle. From 3:30 p.m. to midnight, Inman and two to six other colleagues take care of 198 people who stay at the DESC shelter.

A skinny, articulate, intense young man sporting a ponytail, Inman has worked at the shelter for nearly two years. “I spent my first three months in an overwhelmed haze,” Inman said between gulps from his jumbo plastic coffee mug. “I was overwhelmed by the magnitude of services provided by DESC overwhelmed by the need, overwhelmed by having to turn people away because we don’t have enough beds.”

Now Inman and DESC officials, who all supported the new minimum-wage law, are struggling with another problem: The higher minimum wage will increase the agency’s costs.

In June, the Seattle City Council passed the new minimum-wage law. Proposed by Mayor Ed Murray, the new law has different sets of requirements depending on the size of the business. Beginning April 2015, businesses with fewer than 500 employees must pay at least $10 an hour, increasing each year until 2021 when the wages must be at least $15 an hour. Businesses with more than 500 employees must pay at least $11 an hour beginning in April 2015, increasing each year until 2018, when the wages must be at least $15 an hour.

DESC has slightly more than 500 employees, serves around 7,000 clients a year and has a 2014 budget of $31 million. Beginning in 2015, DESC estimates it will cost the agency between $1.5 and $2 million annually to comply with the new minimum-wage law. DESC wants city hall to cover the additional cost. “The turnover rate at DESC is no secret,” said Inman. “The wages are a tremendous factor, [but] none of us want anything taken away from clients.”

And DESC is just one of the city’s many human-service agencies. Human-service nonprofits don’t have the option of raising their prices to accommodate the new minimum-wage law. The majority of human service providers don’t know what the cost of minimum-wage compliance will be.

In September the mayor laid out his proposed 2015-16 budget but did not include funding for human-service agencies to pay higher wages and preserve services at their current level. “It’s just like an ostrich sticking its head in the sand,” said Julia Sterkovsky, executive director of Seattle Human Services Coalition, an organization of 162 agencies and programs including DESC “If [city hall] doesn’t admit responsibility, they won’t have to do anything about it.”

Sterkovsky said the coalition first informed city hall about this problem in April. The coalition supported a higher minimum wage, but was concerned about how that would translate into higher costs for human service providers. At the time, the city was considering a $15 minimum wage that would start in January 2015 with no phase-in. Sterkovsky surveyed 28 of her coalition’s agencies and found the proposal would cost them $10.9 million and would necessitate raises for more than 2,546 employees. Twenty-one agencies reported “that without cost offset funds they would be forced to reduce services or close their doors.”

A month before the mayor proposed his budget, the coalition outlined a three-point plan to prevent service cuts: “Conduct a thorough study of the cost of complying with the new law,” “[D]evelop a strategic plan ... to preserve current levels of human services,” and “Incorporate the short term solution to raising the minimum wage for human services without cuts to services in the 2015-16 budget.”

The mayor has not committed to any of these.

In an email proposal, Jason Kelly, the mayor’s press secretary, stated, “The mayor believes that employees in social services deserve a living wage, just like those who work in low-wage jobs in the private sector. As we begin to ramp up wages next spring, the mayor’s office will work with the city council to consider policy and budget alternatives that protect vital social services.”

The city council will spend the next two months finalizing the city’s new budget. During that time, the council can add, subtract and commit to funding for programs and studies.

Sterkovsky has met with most of the nine councilmembers. She said that Councilmember Kshama Sawant is committed to ensuring that higher wages don’t translate into human-services cuts. Also, Councilmember Nick Licata said he anticipates there will be additions to human-service funding. “Most of the other councilmembers were very non-committal,” said Sterkovsky.

As part of a collaboration between DESC’s administration and Service Employees International Union Healthcare 1199 NW, Inman has also been meeting with councilmembers.

“I’ve heard a lot of encouraging things from councilmembers,” Inman said. “I’m still waiting to see that the budget reflects the encouraging words.”